The rand slumped more than 3 percent yesterday over renewed uncertainty over South Africa’s land reform plan and a Moody’s warning on the country’s fiscal deficit.
“The rand is under massive pressure on renewed speculation regarding land reform and the implementations thereof. In an already risk-averse market, this only adds to the negative sentiment,” said TreasuryONE in a snapnote.
The rand reacted badly to the speculation. On top of that Moody’s Investor Services warned that the pace of SA’s fiscal consolidation will be slower than government forecasts as weaker-than-expected economic growth and a rising public sector wage bill act as fiscal headwinds.
Moody’s, however, said, despite the slower pace of fiscal consolidation, medium-term deficit targets remain within reach and, if met, will support a stabilisation of debt levels and reinforce its assessment of South Africa’s fiscal and institutional strengths.
By 13:30 the rand was trading 3,35 percent weaker at R14,72 against the US dollar, bringing its loss this month to almost 10 percent.
Meanwhile, the Automobile Association (AA) said yesterday that it expects the substantial rand weakness could undo recent fuel price stability.
The rand, along with other emerging market peers, took a beating on Monday, reaching an intra-day low of R15,70/$, amid a meltdown in the Turkish lira.